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Report Warns West Coast Fuel Prices Could Soar

Natural Resources Defense Council says a shortage in refinery capacity could boost gas to $3 a gallon.

October 6, 2002, 08:00 pm

SAN FRANCISCO -- Consumers up and down the West Coast, who already pay about 20 cents a gallon more for gas than their counterparts across the United States, may soon see their fuel bills balloon even more.

A new report by the Natural Resources Defense Council warns that a shortage in refinery capacity in California will force the state to increase pricey fuel imports by more than 800 percent in coming years.

The shortfall -- which will be exacerbated by a population boom and growing demand for fuel -- could spike gasoline prices to the $3-a-gallon level, asserts the report, citing forecasts made by energy consultants for the state.

"California is in for gas pains if it doesn't reduce its oil dependence," said Roland Hwang, a policy analyst at the San Francisco-based nonprofit environmental group.

Hwang noted that California already imports 30,000 barrels of gasoline a day because of inadequate refinery output, which costs drivers about 15 cents a gallon.

But with the state's population estimated to grow by 14 million by 2020, total demand for gas will jump by as much as 30 percent and increase the amount of imported fuel needed to fill the gap to 280,000 barrels a day, the NRDC said.

The report reflects many of the views on potential gas shortages held by the oil industry, which is also concerned that the state's switch from controversial gasoline additive MTBE to corn-based ethanol by the end of next year could cut refinery output by five percent.

Both MTBE and ethanol help cut air pollution, but MTBE can pollute water supplies and may cause cancer. The industry also worries that there could be shortages of ethanol supplies from the Midwest.

"Without an Environmental Protection Agency waiver on oxygenates [such as MTBE and ethanol], we need to do everything we can to increase capacity," said Anita Mangels, a spokeswoman for the Western States Petroleum Association (WSPA). But what measures should be taken "is the $64,000 question," she said.

California has 13 refineries, down from 26 two decades ago. The old facilities were closed because of the state's strict environmental laws, which likely would block the building of any new refineries, say oil industry analysts.

In its report, the NRDC recommends raising the fuel-efficiency standards of cars and investing in fuel-cell technology to reduce fuel consumption.